Feds' Capital Rules Could Strangle Mortgage Market

Law360, New York (October 18, 2012, 8:05 PM EDT) -- Proposals to boost capital reserves at U.S. banks include several provisions designed to protect financial institutions from risky mortgages in their portfolios, but the effort to create a firewall against failed home loans could stymie mortgage lending, especially at smaller banks, experts say.

Small and community banks fear that the proposals put forward by the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency in June, which would force all banks to increase the high-quality capital that they retain...